How I Renounced My US Citizenship and Why, Part I

2014-01-10The following is a firsthand story of how and why a former US citizen decided to renounce his US citizenship. It's packed with practical advice and priceless insights into this momentous decision.

(Editor's note: The following is a firsthand story of how and why a former US citizen—who kindly shared this information on condition of anonymity—decided to renounce his US citizenship. It's packed with practical advice and priceless insights into this momentous decision. Whether or not you take the ultimate step of renunciation, I believe you will find value from the author's experiences.)

Having evolved philosophically in my adulthood to a fairly hardcore libertarian worldview, I had read the writings of people like Doug Casey, which encouraged people even some decades ago to take concrete steps to internationalize themselves. Not just "talk the talk," but to actually "walk the walk."

My professional career offered me the chance to travel abroad quite a bit, so it was not too difficult for me to begin taking baby steps to internationalize.

I rented an apartment in one of the Asian cities that I frequently visited. A few years later, I made my first overseas real estate purchase of a small apartment in another Asian city, followed by several more in the next few years.

By this time, I was managing to spend about 2/3 of each year outside the US—you could say that I waded into the pool, rather than just diving in.

The passage of the first of the three recent "exit tax" laws by Congress in 1996 had alerted me to how high-stakes the US government regarded full expatriation to be—and inclined me toward doing so.

I reasoned that if they were that anxious to discourage people from leaving, it might well be time to seriously consider doing so.

Still, for about another decade, I wasn't in a good position financially or logistically to do so, although I did begin seriously collecting more information about residency abroad, second passports, etc.

Shortly after my financial and logistical impediments cleared up, Ron Paul began achieving astounding success in the early phases of the 2008 presidential campaign. Encouraged once more at the prospect of there perhaps being a chance to turn things around after all, I put my international plans on hold and devoted nearly the entire first three quarters of the year to his campaign.

But the unremitting ferocity with which mainstream Republicans opposed our every effort led me to renew my efforts to abandon the sinking ship.

Another imperative for me has been the maxim "silence implies consent"—that is, by not acting (especially now that I was in a reasonably good position to do so) to separate myself from the manifest evils of the regime in DC, I would continue granting it my consent.

So, believing at that time (incorrectly, as it turns out) that you had to have another passport before you could give up US citizenship, I settled on the economic citizenship of the Commonwealth of Dominica, which is the quickest legitimate and least-expensive way to clear that hurdle.

I engaged a US-based consultant/agent to undertake the process of applying for Dominica's program—something I definitely recommend.

Even though the agent may not want to hold your hand the whole time or answer every last question you may have, he or she can be quite helpful in navigating any significant rough spots or ambiguities. But be careful: the fees can mount up quickly. Keep in mind that obtaining a second citizenship (so you won't be "stateless" and unable to travel after giving up your US citizenship) and the actual Relinquishment/Renunciation are two distinct phases (there's a third expatriation phase, if you will be a "Covered Expatriate" and have to deal with the "mark to market" exit tax). You'll likely be expected to pay fees to an advisor/agent for each phase, unless you spring for a (much more expensive) "package deal."

Do be careful to choose only a legitimate agency—there are any number of dubious ones offering their "services" on the Internet. If in doubt about one you're considering, you should inquire directly to the government officials of your chosen country whether that agency is in good standing with the officials there.

Initially, it was expected to take about three months to receive the Dominica passport, after all the required documents and preliminaries had been done.

But even as I got those things ready to submit (the required FBI criminal check was routinely quoted as taking up to 12 weeks at that time), the expected approval and completion dates were being pushed out at least several more months.

I had originally considered doing the St. Kitts program, which offered a considerably more useful passport—visa-free entry to all of the EU, as well as to Canada, which is about two dozen more countries than the Dominica passport allows.

So faced with a possibly quite extended delay in getting the Dominica passport and by now having a fair amount of experience in making such an application, I decided to apply for the St. Kitts one as well—and without the additional expense of a consultant/agent.

Since most of the documents and preliminaries I had done for Dominica were also needed for the St. Kitts application, I got the St. Kitts one done much sooner and had everything for it filed about a month after filing for the Dominica one. In the end, the St. Kitts passport was issued about three months before the Dominica one.

With the passport hurdle soon to be cleared, I had to make financial preparations. Not so much on account of the exit tax itself, but much more because of the very punitive, but much less known Section 2801 gift/inheritance tax imposed on all post-expatriation gifts and/or bequests to "US persons" by a "covered" expatriate (which I have the dubious pleasure of being).

Because most of my low-to-mid seven-figure wealth had already been taxed at least once (and also having considerable loss carry-forwards ensuing from the aftermath of the 2008 panic), I was not facing much of an exit tax liability itself.

Once I had the passports in hand, but well before I had finished financial preparations, I made the first of the two visits to a US embassy or consular office abroad required for the actual renunciation process.

On the first visit, you must allow the consular staff to inform (lecture?) you about the "grave" consequences and irrevocability of what you seek to do; and you must assert to them that you understand what you are doing, that you really do intend to do so, and do not expect to retain any rights or privileges of US citizenship.

However, you are not allowed to complete the renunciation process at that first visit. You must go away for at least a short while and then come back on a second appointment, "to be sure you really want to do this."

In my case, the consular official whom I met with on that first visit did not try very much to dissuade me, nor did I have any difficulty convincing her that I had thought about it extensively and knew what I was seeking to do.

Another half-year elapsed before I finished all the required property transfers into irrevocable trusts (to avoid Section 2801 gift/inheritance tax), after which I was finally ready for my actual expatriation appointment.

There are actually two somewhat distinct procedures by which you can give up US citizenship: relinquishment or renunciation. The State Department forms and consular staff procedures are similar, but not identical, for both ways.

Renunciation is the more affirmative way, and may be preferable for that reason alone.

Professional and informal advisors have differing opinions on which is better—and even whether there's any substantive difference at all—apart from the $450 fee now required for a Renunciation filing (no fee at all is currently required for filing a Relinquishment—if one is in a position to choose that route).

There are no differences in IRS/tax consequences, and it's said that the State Department makes no distinction between those who relinquish versus those who renounce.

But the fact remains that there are the two different procedures, and some knowledgeable people do recommend relinquishment (if one's situation permits using that method) instead of renunciation.

Be aware though that pursuing a relinquishment requires the applicant to demonstrate to the satisfaction of the State Department people involved (both in the embassy/consular office and the application reviewers in Washington), that the applicant's "potentially expatriating act" (which is usually the act of obtaining citizenship in another country) was truly done "with the intent to give up US citizenship" at the time of "performing the potentially expatriating act."

In contrast, making a renunciation filing, which involves performing an Oath of Renunciation before a consular officer, provides convincing prima facie evidence of intent to give up US citizenship.

The State Department may reject a renunciation filing only if there's clear evidence that the applicant was under some sort of duress to take the oath, or that the would-be renunciant intends to retain any prerogatives of US citizenship (such as continuing to reside in the US without obtaining any residency visa/permission as an "alien").

Because so much time had elapsed since my first visit, I had to re-do it. Mercifully, the consular staff allowed me to return quite soon for the actual renunciation process.

There are numerous reports of delays of weeks to months in getting appointments (for either or both of the two required visits) at many of the busier embassies. I have personal knowledge of an embassy in a major Asian city requiring a two-week interval between an applicant's first and second renunciation visit regardless of how full or slack its appointment calendar was.

A note about embassy/consular office practices: The expatriation requirements and procedures are stated in fairly thorough detail in in Volume 7, chapter 12 of the State Department's Foreign Affairs Manual (FAM).

In practice though, each embassy/consular office seems to operate with a fair amount of discretion.

As just one example, FAM explicitly states that an embassy or consular office must allow any US citizen to expatriate who applies there to do so. Yet I was told by consular staff in one major Asian embassy that it refuses to let anyone who is not a legal resident of that country expatriate at that embassy.

Though they're primarily focused on the plight of the many Americans who permanently moved to Canada, the Isaac Brock Society maintains an excellent website. It keeps an extensive—if anecdotally based—log of people's expatriation experiences at various embassies/consular offices around the globe.

The actual process of formally doing the renunciation was straightforward and was conducted without any further hassle or delay at my next appointment.

Editor’s Note: Things can change quickly. New options emerge, while others disappear. This is why it's so important to have the most up-to-date and accurate information possible. That's where International Man comes in. Be sure to get the free IM Communiqué to keep up with the latest on the best international diversification opportunities.

See here for Part II of this story. It has specific details about the renunciation process as well as the author's personal experiences dealing with US officials during and after the process.